Income Approach Not Applicable
It s just a reportable fact.
Income approach not applicable. It is interesting to hear people argue that the income approach is not applicable or suitable to sfr s in essence because it does not simulate the market s decision making process i e srrs are not investment properties. The income approach to value also known as income capitalization approach is used to determine the value of an income generating property by deriving a value indication by conversion of expected benefits like cash flows and reversion into value of property. Investors seeking to assess a younger company may choose not to apply the income approach as it may not be applicable due to a lack of results on which to base projections. If they can t make the loan payments they don t have the cash to bring to the table to sell it for less than they owe.
The rate of return for companies that are younger can vary quite a bit. That usually happens when they can t make the loan payments. While that statement would have truth in it there are still two glaring problems. The income approach is a real estate appraisal method that allows investors to estimate the value of a property based on the income it generates.
This approach is applicable for those properties that generate income like the rental properties which includes non owner. Failing to find sufficient data is not a failure of the appraisal. If people only borrowed at. To sell a property for less than is owed a seller would need to be highly motivated.
However if there is a basis to work from using the build up method may not be appropriate.